John A. Barker Share Facebook Twitter LinkedIn Email This week marks the one-year anniversary of The Kresge Foundation’s 25% by ’25 initiative — our commitment to ensuring that by 2025, 25% of our U.S. assets will be invested with firms owned by women and people of color. John Barker, managing director of Kresge’s Investment Office, took a moment to answer a few questions about the first year of the initiative and share how 25% by ’25 will march forward, particularly in the era of COVID-19. First things first — will 25% by ’25 still be a priority for the foundation during and after the COVID-19 pandemic? Absolutely. Beyond the very real humanitarian crisis, COVID-19 is producing a set of challenges investors have never seen nor imagined. Social distancing measures now impact 92% of global GDP. The U.S. stock market saw the quickest decline in history, losing 33.9% between February 19 and March 23. And in the month of March alone, the stock market had its largest one-day percentage gain since 1933 and its second-largest one-day percentage loss since 1940. Yet, regardless of the macroeconomic conditions, the job of our team remains the same: generate the returns necessary to support Kresge’s mission. In numerical terms, this translates to a 5.5% targeted real rate of return over the long term. Achieving such returns in the current tumultuous environment will certainly be challenging. We can’t afford to overlook any opportunities to improve returns, and that’s why continuing to identify and invest in premier diverse-owned firms is still a priority for our team. Research indicates, and we agree, that investing in diverse-owned firms improves returns both in the short- and long-terms. Does this mean you’re currently allocating to new managers? It’s simply too early to tell how we’ll be allocating capital in 2020. In the weeks ahead, we’ll get a better sense of the pandemic’s impact on the cash flow needs of both our organization and portfolio (particularly our large private portfolio). We’ll decide how to allocate capital between our existing partners and new managers when we have a clearer picture. What would you say to other foundations or companies that may be nervous or even reconsidering their own diversity initiatives? Now is not the time to waiver because investing in diverse-owned firms improves returns. And this holds true in times of dislocation. In fact, the National Association of Investment Companies recently issued a report finding that funds raised by diverse-owned private equity firms immediately after the last financial crisis outperformed their peer group. So rather than waiver, now is actually the time to pursue diverse partners. What steps have you taken to work toward this goal over the past year? We launched the initiative with a three-pronged approach to: Intentionally attract more diverse candidate pools; Diversify the foundation’s endowment managers; and, Setting the basis for peer organizations and the investment industry to follow suit. Our team has also revamped our recruiting and hiring practices to ensure we’re attracting a more diverse and inclusive candidate pool. Additionally, we have taken steps to reduce implicit bias in all hiring practices — from blind recruiting processes to removing a prior-work prerequisite for interns. We’ve also gone through the process of reviewing job descriptions to ensure there is no unintentional bias. We were also the first private foundation signatory to ABFE’s Diveristy in Foundaton Asset Management pledge in hopes of spurring more of our peers to make similar commitments. Have you found it hard to identify enough diverse/women-owned management firms that can compete with current managers to work toward this goal? We’ve said since the beginning of this initiative: it’s about equity and accountability, but it’s also about economic outcomes. We believe that diversity of thought, background and beliefs leads to better investment decisions and stronger financial returns. Diversifying our investment managers is good business and the people we’ve invested in through this initiative excel in their roles. It has never been about lack of good candidates or successful firms, but rather about biases prevalent in our society that lift some people up and keep others down. We’re trying to correct for any biases we may have and encourage others in the philanthropic and finance sectors to do the same. Have you had any surprise learnings? We have been encouraged by the response to this initiative. Within Kresge, our Investment team has embraced this program as an opportunity to confront any biases within our hiring processes. And it has been a welcome growth opportunity to help us examine any individual implicit biases we may harbor. We have also been encouraged by the reception this initiative has had throughout the investment industry. There is a profound acknowledgement that this industry can do so much better and a desire for a roadmap forward is palpable. We are proud to have brought this initiative to the table, share what we’re learning and do our part to lead the finance industry forward. With regard to this specific initiative, what efforts are being made to hire people of color from Detroit? As we’ve seen first-hand in our hometown of Detroit during other recessions and times of economic turmoil, it is always communities of color that are hit hardest and are often the last to see reinvestment. We simply cannot let that be the case in Detroit any longer. Kresge Investment Office Analyst Evrard Ndongmo (left) and Risk & Operations Associate Thomas Nowinski lead an Investments 101 session at Cass Technical High School in Detroit. Kresge has been actively helping to build a pipeline of young people in Detroit who are interested and prepared for a career in the investment industry. We support youth financial literacy programs and host interns from institutions specifically focused on advancing women and people of color. Since 2015, Kresge has created student-managed portfolios at both Oakland University and Wayne State University, two public colleges in metro Detroit. The funds are intended to couple curriculum with real-world investment experience for undergraduates while exposing them to career opportunities at dozens of corporate, philanthropic and public institutions in Michigan. What kinds of policies do you hope your investing peers will adopt as a result of you launching this initiative? We hope that our peers will make the same firm commitment to diversity and inclusion that Kresge has. It will take each one of us to truly transform this industry into what we know it can be. Initiatives to change hiring practices by removing opportunities for bias and investing in people from all walks of life will make a huge difference for all of us. What are the next steps to spur continued action within the industry? In 2019, the Kresge Investment Office team shared our 25% by ’25 initiative nationwide at a number of industry panels and conferences, and established new partnerships that have secured a solid foundational ecosystem to move this initiative forward. Especially in this moment of crisis, we feel even more of a responsibility to carry this flag. We will continue to spread this message of diversity and inclusion to ensure that this crisis doesn’t erase the momentum we fostered in 2019. By recommitting to 25% by ’25, we hope to signal to all industries that inclusion and diversity are the way forward. When everyone has a seat at the table, we all benefit from the creativity and experiences of people from all walks of life.